Direct effect is a principle of EU law which draws much attention and criticism. Article 288 TFEU appeared to deny direct effect of Directives. However, in Van Duyn v Home Office[i] the ECJ, now the CJEU, held that Directives could have direct effect under certain circumstances. Failure to satisfy these conditions means that a Directive will not have direct effect. Direct effect is desirable for those that want to ensure the complete and full and uniform implementation of EU law throughout the Member States. This had led the CJEU to create principles which mitigate the harshness of these conditions. These principles include a broad interpretation of public body, the principle of indirect effect and state liability.
Directives are not directly applicable or automatically binding in the domestic legal systems of the EU Member States. They require implementation by Member States. Traditionally, Directives were perceived as not having direct effect. Support for this opinion is found in Article 288 TFEU which states that a Directive ‘shall be binding as to the result to be achieved, upon each Member State to which it is addressed’. The CJEU has also raised concerns that the direct effect of Directives could lead to legal uncertainty as the line between Directives and Regulations could be unnecessarily blurred.[ii]
However, in Van Duyn[iii] the CJEU established that Directives could have direct effect. This was significant as it meant that individuals had rights that could be enforced in national courts. The strongest argument in support of the direct effect of regulation is the estoppel argument.[iv] This argument states that a Member State that did not implement a Directive could not then rely on this failure as a defence against someone who is trying to take advantage of the provisions of the Directive.[v] If the Member State had implemented the Directive, that Member State could have ‘exercised its choice as to how it wants to do it’.[vi] Failure to implement results in forfeiting that right.
However, there are a series of conditions that must be satisfied for a Directive to have direct effect. This has the effect of limiting the application of direct effect in relation to Directives. First, the provision relied on must be sufficiently clear and precise and be unconditional.[vii] Clear and precise relates the wording of a provision and if it is unambiguous then it will be sufficiently clear and precise.[viii] Conversely, if a provision is too vague, and this prevents national courts from interpreting the provision, then it is unclear.[ix] Further, direct effect is possible only after the implementation deadline for the Directive has passed.[x]
A further restriction, and one that is most controversial, is that direct effect is only applicable to vertical relationships that involve the state or a public authority. It does not apply to horizontal relationships between individuals.[xi] This horizontal limitation has been heavily criticised. One argument advanced is that if Directives had horizontal direct effect then they would be more effective and that there would be a more comprehensive and uniform application of EU law throughout the Union.[xii] Linked to this point, is that the current law on direct effect creates indefensible distinctions. For example, in Harz v Deutsche Tradax GmbH[xiii] the claimant had a job application rejected and this contravened the Equal Treatment Directive. The respondent was a private company. The Court held that the claim could not be successful as this was a horizontal relationship. Had this case involved a vertical relationship, it would have been decided differently. However, this distinction remained, and the distinction was supported by reference to the argument that individuals were not the addresses of Directives and direct effect should not be extended too far. However, it would not be long before the CJEU developed principles to sidestep the limitations of the direct effect principle.
The CJEU had created several principles that have allowed it to mitigate the harshness of the direct effect conditions. First, the Court has promoted a broad interpretation of public body. In Foster v British Gas[xiv] the defendant was British Gas. However, the Court held that the test for whether an entity was a public body involved three elements. First, the body was made responsible by the state for the provision of a public service. Second, the entity was under state control. Third, the entity had special powers for this public service which went beyond the powers which they normally exercise. This approach has been endorsed by the CJEU recently.[xv] The application of the test has been generous in the Member States. In NUT v Governing Body of St Mary’s CoE Junior School[xvi] the Court held that the Foster formula was not exclusive and that entities that were different from British Gas could also be covered. The CJEU has also stated that the state, even where it is acting in a private way, which is not linked to its public nature, will still be considered in a vertical relationship.[xvii]
The limitations of direct effect have been softened by the introduction of the principle of indirect effect. The principle was established in Van Colson and Kamann[xviii] and states that Member States must interpret national law, as far as is possible, in light of EU law. In Maleasing SA[xix] the expansive scope of this obligation was demonstrated when the CJEU held that the obligation extended to interpret national law in a compliant way, whether the law was adopted before or after the Directive. Such an expansive duty has led some commentators to argue that it is artificial to deny Directives their horizontal effect.[xx]
However, the CJEU has put some important limitations to the obligation. First, national courts are to interpret law ‘so far as possible’. This raises the assumption that there will be times when this cannot be done. An example is Wagner Miret v Fondo de Garantira Salaria[xxi] where the CJEU accepted that a compensation scheme for workers could not extend to managers. This domestic law could not be interpreted by reference to Directive 80/97 to allow this entitlement. Further, national courts do not have to interpret EU law against domestic provisions that have a clear meaning.[xxii] The CJEU does not expect national courts to come up with ‘an artificial or strained interpretation of national law’.[xxiii]
A final principle to mitigate the problems with direct effect is state liability. This principle can be traced to Francovich.[xxiv] The CJEU held that an individual could claim damages if they have suffered loss as a result of a breach of EU law by a Member State. To qualify, a claimant must show that the Directive gives rights to individuals, the content of these rights needs to be identifiable from the Directive, and there must be causation between the breach and the damage or loss of the individual. Since this case, the state liability principle has been significantly expanded. First, it has been expanded to cover retaining legislation that infringes the Treaty as opposed to not implementing a Directive.[xxv] Interestingly, the CJEU also found that the right extended to the decision of the final appeal court in Austria.[xxvi]
However, the Factortame III case also introduced the idea of a sufficiently serious breach in instances where the Member States had discretion. This allowed the Member States a way of limiting the effect of state liability. In The Queen v H.M. Treasury, ex p British Telecommunications plc[xxvii] the Court held there was no serious breach as the provision of the Directive was imprecise and therefore the meaning given to it by the government was reasonable. However, where discretion is limited, non-implementation will be enough to show that there has been a serious breach.[xxviii]
Direct effect of Directives is possible and represents an important tool for individuals to access to rights under EU law. However, direct effect has significant limitations. They have been mitigated to a large extent by indirect effect, state liability and a broad interpretation of public body.
[i] (Case 41/74) [1974] 1337.
[ii] Faccini Dori, C-91/92, EU:C:1994:292 para 24
[iii] (Case 41/74) [1974] 1337.
[iv] Michal Bobek, The Effects of EU Law in the National Legal Systems (December 23, 2013). C Barnard and S Peers (eds.), European Union Law (Oxford University Press, 2014) 140-173 available at SSRN: https://ssrn.com/abstract=2371396
[v] Ibid.
[vi] Ibid.
[vii] Ibid.
[viii] Van Duyn (n 3) para 14.
[ix] Ibid.
[x] Ibid.
[xi] Case 152/84 Marshall [1986] ECR 737.
[xii] Case C-91/92 Faccini Dori [1994] ECR I-3325 [20-24].
[xiii] (Case 79/83) [1984] ECR 1921.
[xiv] (Case C-188/89) [1990] ECR I-3133.
[xv] Case C-282/10 Dominguez [2012] ECR I-000 [39].
[xvi] [1997] 3 CMLR 630.
[xvii] C-268/09 Georgiev [2010] ECR I-11869 [70].
[xviii] [1984] ECR 1891.
[xix] (Case C-106/89) [1990] ECR I-4135.
[xx] Paul Craig, ‘The Legal Effect of Directives: Policy, Rules and Exceptions’ (2009) 34 European Law Review 349.
[xxi] (Case C-334/92) [1993] ECR I-6911.
[xxii] Pupino (Case C-105/03) [200] ECR I-5285
[xxiii] Case C-432/05 Unibet [2007] ECR I-2271 [55].
[xxiv] (Cases C-6/90 and C-9/90) [1991] ECR I-5357.
[xxv] C-46/93 and C-48/93 Brasserie du Pêcheur SA v Bundesrepublik Deutschland and Queen v Secretary of State for Transport, ex p Factortame Ltd [1996] ECR I-1029.
[xxvi] Kobler v Austria (Case C-224/01) [2003] ECR I-1039.
[xxvii] [1996] ECR I-1631.
[xxviii] C-178/94 Erich Dillenkofer [1996] ECR I-4845.